Posco announces highest net profit since 2011

Net profit at Posco, Korea’s largest steelmaker, more than doubled last year on higher earnings from its non-steel businesses, improved performance at its foreign affiliates and sale of investment securities, the company told analysts in a call Wednesday.

Posco made a 2.97 trillion won ($2.79 billion) net profit last year, the highest since 2011, and up from 1.05 trillion won in 2016. Operating profit was 4.62 trillion won, an increase of 62.5 percent from the previous year, and revenue was 60.66 trillion won, up 14.3 percent.

The boost in non-steel mostly came from Posco Engineering & Construction and Posco Energy, a power company. In 2016, both affiliates posted net losses, but Posco said the construction company was able to turn around losses from foreign projects through favorable returns in residential apartment projects, while Posco Energy saw profit thanks to a price increase in electricity. According to Posco, operating profit from non-steel businesses increased from 12.9 billion won in 2016 to 1.09 trillion won last year.

“In last year’s shareholders meeting and company reshuffle, CEO Kwon Oh-joon had announced a strategy focused on ramping up non-steel businesses and securing future growth engines,” Posco said in a statement.

Foreign affiliates also showed favorable performance. PT.Krakatau Posco in Indonesia made a profit for the first time after starting operations in 2014. Posco Mexico and Posco Maharashtra in India posted record operating profit last year, boosting total operating profit from foreign affiliates by about three times, from 137.1 billion won in 2016 to 476.3 billion won last year.

Without earnings from its affiliates, Posco alone posted 28.55 trillion won in revenue, up 17.4 percent year on year, and 2.9 trillion won in operating profit, up 10.1 percent. Net profit increased by 42.6 percent to 2.55 trillion won.

For the past four years, the steelmaker has been under a tight turnaround plan to improve its financials. Over the years, the company has completed 150 streamlining projects, including mergers, sales and disposal of investment securities.

The company said it has improved its financials by 7 trillion won and this year hopes to focus on expanding investment by 1.6 trillion won, to 4.2 trillion won, and reach a sales target of 61.9 trillion won.

The investment will largely be spent on industries with high potential, such as electric car battery production and smart factory construction.

Last February, Posco completed a factory in Korea to produce lithium carbonate, a material used in rechargeable lithium-ion batteries, and hopes to expand its presence in the highly promising electric vehicle market.

Among its first major moves of the year, Posco inked a partnership with Huayou Cobalt on Wednesday to set up two joint ventures in China.

One will produce cathode materials, crucial components in lithium-ion batteries. Posco will own 60 percent and Huayou 40 percent.